Equity interest can help tie in key employees

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Like football stars, being offered more money to go elsewhere is an attractive proposition for valued employees.

But there are ways of keeping them and the grass is not always greener on the other side of the fence, warns Neil Mocroft, Head of the Company and Commercial Department at Clark Brookes Turner Cary, the Midlands law firm with offices in West Bromwich and Stratford-upon-Avon.

His comments came as the Office for National Statistics revealed that May saw the biggest increase in total pay over a three-month period since April 2010, with average weekly earnings including bonuses ahead by 3.2 per cent compared with the same period a year earlier, up from 2.7 per cent in the three months to April. Mr Mocroft said:

“For owner managed and family businesses it can be hard to compete on pay and indeed many accept it can’t be done.

You only have to see the way skilled engineers have left small manufacturing firms in the West Midlands given the higher wages on offer at Jaguar Land Rover as the motor manufacturer continues its expansion around the world. They have been unable to resist the lure of bigger salaries as well as the chance to further develop their careers at such a successful and innovative car maker.

However there are ways SMEs can seek to retain staff through a combination of financial incentives and attractive conditions of employment.

An incentive scheme can be key to attracting and retaining the best employees. This could be based around cash bonuses or options and shares in the business.

So long as it is structured in the right way an equity incentive does not necessarily necessitate any loss of control or long term dilution of ownership. But it will give employees a stake in the company and develop in them a common interest in growing the business.

It is a move well worth considering but it is important to take advice.”

Mr Mocroft said conditions of employment also have to be right if employees were to be coaxed into staying loyal. He noted:

“Family businesses need to treat employees almost as if they too were family, avoiding redundancies in the hard times, promoting from within and investing in their people.

There needs to be a culture of commitment and purpose. Praise people when a job is done well, encourage a friendly and supportive atmosphere in the workplace and be sympathetic in terms of flexibility in working hours, patterns and locations.

Employees will react positively if you act positively towards them. Staff who feel valued respond better and happy staff means greater productivity.

Remuneration matters because just about everyone aspires to a higher standard of living for themselves and their families. But other factors can be just as influential as to whether a person stays or goes.”